UPDATE 4-Expedia's Khosrowshahi poised to take Uber CEO job - memo

Heather Somerville and Jeffrey Dastin

Published 9:13 PM ET Mon, 28 Aug 2017
Reuters

(Adds detail on stock options)

SAN FRANCISCO, Aug 28 (Reuters) - Expedia Inc Chief Executive Dara Khosrowshahi is poised to accept Uber Technologies Inc's offer to become its new CEO, according to an internal memo sent to Expedia staff, putting him in charge of turning around the loss-making, scandal-ridden company.

The Uber board of directors on Sunday chose Khosrowshahi as its next leader after about two months of searching, according to two sources with knowledge of the matter, but its problems are far from solved.

The ride-services company is still grappling with an overhaul of its workplace culture, a range of legal troubles and most recently a bitter board dispute.

"Boy, he certainly has his work cut out for him," Douglas Quinby, a travel industry analyst with research firm Phocuswright, said of Khosrowshahi. Expedia, by contrast, "has always been a very tightly run ship," he said.

Uber has not yet announced its new leader to the world, as a bitter board dispute escalates. Ousted CEO Travis Kalanick on Monday filed a motion to dismiss or stay a lawsuit brought against him by Uber investor Benchmark Capital.

The venture capital firm has accused him of fraud and is seeking to force him off the board and rescind his ability to fill two board seats.

In the court filing, Kalanick said he had initiated arbitration proceedings against Benchmark, arguing that the Delaware court where the lawsuit was filed does not have jurisdiction over board voting matters.

By late Monday, a day after a spokeswoman confirmed that the board had voted, neither Uber nor its board members had publicly announced their selection of Khosrowshahi. They said they were waiting to inform employees, although the timing of that remained unclear.

Meanwhile, Expedia Chairman Barry Diller said earlier on Monday that Khosrowshahi planned to take up the offer. "Nothing has been yet finalized, but having extensively discussed this with Dara, I believe it is his intention to accept," Diller wrote in the memo seen by Reuters.

Uber investors and analysts have praised the board's selection of Khosrowshahi, 48, who is widely seen as a steady manager with a calming influence, knows how to please Wall Street and will take a hard line on workplace misconduct that Uber has developed a bad name for, especially sexual harassment.

"Expedia's loss is Uber's gain," said Mark Mahaney, an analyst with RBC Capital Markets. "While execution under Khosrowshahi hasn't been flawless, it has been exceptionally good."

Khosrowshahi stands to make as much as $127 million from unvested Expedia stock options at Monday's share price, according to company regulatory filings, a factor which no doubt featured in discussions over his compensation at Uber.

Shares of Expedia closed down 4.5 percent on Monday.

BIG CHALLENGES

Khosrowshahi will have to contend with the legacy of his predecessor, Kalanick, Uber's pugnacious co-founder, who was ousted as CEO in June after shareholders representing about 40 percent of the company's voting power signed a letter asking him to step down.

His resignation was the culmination of months of scandals. Uber has been hit by allegations of sexual harassment, a lawsuit alleging trade-secrets theft, a federal criminal probe over use of software to evade city regulators, and allegations of executives mishandling the medical records of a woman who was raped by her Uber driver in India, among other controversies.

Some of these embarrassments will be Khosrowshahi's to deal with. A trial in the trade-secrets lawsuit, filed by Alphabet Inc's self-driving car unit, Waymo, is set for October. The outcome of that case could thwart Uber's autonomous car ambitions.

"He's relatively untested when it comes to some of the big issues facing the company," said Jan Dawson, an Uber analyst with Jackdaw Research.

Still, several Uber investors told Reuters they wanted Kalanick - who is chiefly responsible for building Uber into a $68 billion empire that has changed urban transportation - to stay involved to help with company strategy.

"I still think Travis in many ways is one of the company's greatest assets," said Bradley Tusk, an Uber adviser and shareholder. "One of the big things for Dara to do is to figure out how to deal with Travis and how to incorporate Travis into the business."

(Reporting by Heather Somerville and Jeffrey Dastin in San Francisco and Supantha Mukherjee in Bengaluru; Editing by Saumyadeb Chakrabarty and Bill Rigby)